Co-payment in Health Insurance

What is Co-pay in Health Insurance?

Co-pay is the percentage of the claim amount that the policyholder agrees to pay out of pocket during claim settlement, while the insurer pays the balance claim amount. It usually varies from 10% to 30% and is specified in the health insurance policy. It is mostly mandatory for claims filed by senior citizens above 60 years. However, policyholders can also opt for voluntary co-payments to reduce their insurance premiums.

Let's understand what is co-pay in health insurance with example:

Suppose Ramesh buys a senior citizen health insurance policy of ₹5 lakh with a mandatory co-payment of 10%. A couple of months later, he is hospitalized for dengue, leading to a hospital bill of ₹4 lakh. In this case, Ramesh will have to pay 10% of ₹4 lakh, i.e. ₹40,000, from his own pocket as co-payment, and his insurance company will pay the remaining ₹3.6 lakh.

How Does Co-payment Work?

Co-payment in insurance gets activated as soon as a claim is raised. When the policyholder files a claim, they are required to pay the co-pay amount towards the payment of medical bills, while the insurance company pays the remaining claim amount. Unless the policyholder pays the co-payment amount, the insurance company is not liable to pay the remaining claim amount.

For example, suppose Mr. Mahesh Lamba's health insurance policy comes with a mandatory co-pay of 20% on all claims. After a few months, he files a claim of ₹7 lakh for a heart surgery. Take a look at the following table to understand how does co-payment work in insurance for different sum insured:

Types of Co-pay in Health Insurance

In health insurance, co-payment can be of the following types:

Based on Compulsion:

1. Mandatory Co-payment – This type of co-pay is mandatory, and policyholders cannot opt out of it.
2. Voluntary Co-payment – This type of co-pay is voluntarily opted by policyholders to reduce their health insurance premiums.

Based on Application:

1. Co-payment for Senior Citizens – This co-pay applies to all claims filed by senior citizens above 60 years.
2. Co-payment at Non-Network Hospitals – This co-payment gets activated if the insured avails treatment outside the insurer's network of hospitals.
3. Zone-based Co-payment – This co-pay may apply if the insured is from a Zone 2 or 3 city but avails treatment in Zone 1, i.e. metro cities.
4. Co-payment of Specific Treatment – This co-payment gets activated if a claim is filed for a specific procedure or treatment.

What is the Difference Between Co-payment and Deductible?

Check out the following table to know the difference between co-payments and deductibles:

What are the Benefits of Co-pay in Health Insurance?

Take a look at the benefits of co-payment in health insurance:

• Lowers Premiums – Buying a mediclaim policy with a co-payment clause is available for a lower premium. This happens because co-payment enables policyholders to share the liability of the insurance company, and hence, they charge a lower premium. The higher is the co-payment, the lower will be the premium.
• Prevents Minor Claims - As co-payment requires people to pay a portion of their claim amount, it discourages them from filing unnecessary health claims. They avoid filing a claim for minor illnesses that can be cured at home, like fever, diarrhoea, etc., as they will have to share the claim amount.
• Access to Quality Healthcare – Co-payment allows insurers to provide quality healthcare to the insured without any financial burden.
• Discourages Getting Admitted to Expensive Hospitals – A medical insurance plan with co-pay discourages people from getting admitted to expensive hospitals. This means policyholders will have to pay more from their own pocket if the policy comes with a mandatory co-payment.
• Promotes Financial Planning – With co-payment, policyholders are aware of the upfront costs associated with filing a claim and hence, plan their finances better.

What are the Disadvantages of Opting for Co-pay in Health Insurance?

Take a look at the disadvantages of opting for co-payment in health insurance:

• Increases Out-of-Pocket Expenses – Co-payment increases the out-of-pocket expenses of the insured, leading to major financial burdens.
• Beneficial Until No Claim is Raised - Buying a mediclaim policy with a higher co-pay is beneficial until a claim is raised. Once a claim is filed, the amount saved on premiums will be used to pay the co-payment amount.
• Prevents Health Insurance Claims – If the co-pay amount is high, it may prevent policyholders from filing claims and seeking financial help to cover medical expenses when they need it the most.
• Additional Paperwork - Co-payment involves increased paperwork and documentation, which discourages people from filing claims.

Things to Consider Before Opting for Co-pay in Health Insurance

The following things must be considered before opting for co-payment in a health insurance policy:

• Co-pay Percentage – Policyholders must choose a co-pay percentage that they can afford to pay when it translates into medical expenses. Opting for a higher co-payment can increase their out-of-pocket expenses.
• Premiums – Co-payment directly lowers health insurance premiums. Policyholders must check the difference in premiums before and after opting for co-pay to know how much money they will actually save.
• Terms & Conditions – Make sure to thoroughly understand where co-pay applies in the health insurance policy. For instance, a 10% co-payment on all claims or on a specific treatment.

Who Should Buy Health Insurance with Co-pay?

Before buying a health plan with a co-payment clause, policyholders should consider their medical history and current medical state. Healthy individuals with no major health issues and who follow a healthy lifestyle, diet and exercise regularly have lower chances of raising a health insurance claim. Hence, buying a health plan with co-payment will be beneficial for them.

On the other hand, people with a sedentary lifestyle or in old age are more susceptible to health-related issues. They may need to file a claim under their medical insurance policy at some point. Therefore, opting for a health insurance plan with no co-pay is best for them.